The first three quarters of 2023 were spent dealing with the fallout of 2022 and litigating the FTX debacle

The year 2023 has been a challenging one for the crypto industry, as we had to cope with the aftermath of the events that shook the market in 2022. One of the most prominent and controversial issues was the FTX scandal, which involved allegations of market manipulation, insider trading, and fraud.

The legal battle between FTX and its accusers has been ongoing for most of the year and has had significant implications for the regulation and reputation of the crypto space.

As you may recall, FTX, a leading crypto exchange and derivatives platform, was accused of market manipulation, fraud, and money laundering by several regulators and law enforcement agencies around the world. The allegations stemmed from FTX’s involvement in a series of controversial trades and transactions that allegedly inflated the prices of certain tokens and manipulated the futures market. FTX denied any wrongdoing and claimed that it was a victim of a coordinated smear campaign by its competitors and enemies.

The legal proceedings against FTX began in early 2023, and they quickly turned into a complex and costly ordeal for both sides. FTX faced multiple lawsuits, investigations, and fines from various jurisdictions, while also trying to defend its reputation and business operations. The crypto community was divided over the FTX case, with some supporting FTX as a pioneer and innovator in the space, and others condemning FTX as a rogue and reckless actor that harmed the integrity and credibility of crypto.

The FTX case also raised important questions about the regulation and governance of crypto, and the role and responsibility of exchanges and platforms in ensuring fair and transparent markets.

The FTX case is still ongoing at the time of writing this post, and it is unclear how it will end or what impact it will have on the crypto industry. However, I believe that there are some key takeaways that we can learn from this episode, regardless of the outcome.

First, we need to recognize that crypto is not immune to manipulation, fraud, or corruption. As crypto grows in size, scope, and influence, it also attracts more attention, scrutiny, and hostility from various actors, both inside and outside the crypto space.

We need to be vigilant and proactive in detecting and preventing any malicious or unethical behavior that may undermine the trust and value of crypto. We also need to be accountable and transparent in our actions and decisions and cooperate with regulators and authorities when necessary.

Second, we need to foster a culture of innovation and collaboration in crypto. Crypto is a dynamic and evolving field that offers immense opportunities for creativity and experimentation. We should encourage and support new ideas and projects that can advance the state of the art and benefit the crypto community.

However, we should also respect the rules and norms that govern the crypto space and avoid any practices or activities that may harm or exploit other participants or stakeholders. We should also seek to collaborate with other players in the crypto ecosystem, such as developers, users, investors, media, educators, etc., to create synergies and positive outcomes for everyone.

Third, we need to prepare for the future of crypto. Crypto is still in its early stages of development, and there is much room for improvement and growth. We should not be complacent or satisfied with the status quo, but rather strive to make crypto better, faster, safer, more accessible, more inclusive, more diverse, more sustainable, etc.

We should also anticipate and adapt to the changing needs and expectations of the crypto market and society at large. We should also embrace change and uncertainty as opportunities rather than threats.

2023 has been a difficult but valuable year for crypto. It has tested our resilience and resolve as a community, but it has also taught us some important lessons and insights that can help us improve and advance our field. I hope that 2024 will be a more positive and productive year for crypto, where we can overcome our challenges and achieve our goals.

Crypto Industry reacts to SEC’s Coinbase denial

The Securities and Exchange Commission (SEC) has rejected Coinbase’s proposal to launch a crypto lending program, citing concerns over investor protection and market manipulation. The decision has sparked a wave of criticism from the crypto industry, which sees the move as another example of the regulator’s hostility and lack of clarity towards innovation in the space.

Coinbase, one of the largest and most popular crypto platforms in the US, announced in June that it planned to offer its customers the opportunity to earn interest on their crypto holdings by lending them out to verified borrowers. The company said it would initially support USD Coin (USDC), a stablecoin pegged to the US dollar, and offer a 4% annual percentage yield (APY) on the deposits.

However, in September, Coinbase revealed that the SEC had threatened to sue the company if it launched the lending program, claiming that it would violate federal securities laws. Coinbase argued that its product was not a security, and that it was similar to other existing offerings in the market, such as BlockFi and Celsius. The company also said it had tried to engage with the SEC for months, but received no clear guidance or explanation from the agency.

On November 17, Coinbase announced that it had decided to withdraw its lending program proposal, after failing to reach an agreement with the SEC. The company said it was disappointed by the outcome, but that it would continue to explore other ways to provide more value and utility to its customers.

The crypto industry reacted with frustration and dismay to the news, accusing the SEC of stifling innovation and creating uncertainty for both crypto businesses and consumers. Many industry leaders expressed their solidarity with Coinbase, and called for more clarity and collaboration from the regulator.

Here are some of the reactions from prominent figures in the crypto space:

• Brian Armstrong, CEO of Coinbase: “Disappointed by this outcome. Lending products are common in crypto, as they are in traditional finance. We will keep working hard to bring more innovation to crypto in a compliant way.”

• Jeremy Allaire, CEO of Circle, the issuer of USDC: “This is a sad day for crypto innovation in America. Coinbase Lend was a safe, secure and regulated way for millions of Americans to earn a yield on their USDC holdings. The SEC has effectively shut down this opportunity for no good reason.”

• Caitlin Long, CEO of Avanti Bank, a crypto-focused bank in Wyoming: “The SEC’s rejection of Coinbase Lend is a huge mistake. It will drive more people to unregulated platforms that offer much higher yields, but with much higher risks. The SEC is supposed to protect investors, not push them away from regulated options.”

• Anthony Pompliano, co-founder of Morgan Creek Digital, a crypto investment firm: “The SEC’s decision is not surprising, but it is disappointing. They are clearly not interested in fostering innovation or competition in the crypto industry. They are acting like an obstacle, rather than a partner.”

• Jake Chervinsky, general counsel of Compound Labs, a decentralized lending protocol: “The SEC’s denial of Coinbase Lend is not only bad for Coinbase, but for the entire crypto ecosystem. It sends a chilling message to anyone who wants to build or use crypto products in the US. It also shows how far behind the SEC is in understanding and regulating this new technology.”